August 12, 2016 / 2:42 PM / 2 years ago

UPDATE 1-Brazil's Goldfajn says to intervene in forex market when needed

(Adds Goldfajn comments and context)

SAO PAULO, Aug 12 (Reuters) - Brazilian central bank chief Ilan Goldfajn reiterated on Friday that the central bank will cautiously use its tools when needed to intervene in the foreign exchange market.

The real currency weakened more than 1 percent earlier on Friday on comments from interim President Michel Temer, who told a local newspaper he is worried about the appreciation of the local currency.

“Regarding the floating exchange rate, we have stated that the central bank, at its discretion and without hurting the premises of this regime, will sparingly use the currency tools available,” Goldfajn said at a central bank event in Sao Paulo.

He said the bank will continue to reduce its traditional currency swaps holdings without disrupting the market and depending on conditions.

By intervening constantly, the central bank has reduced the volume of traditional currency swaps on its balance sheet from more than $100 billion last year to below $50 billion currently.

Goldfajn warned that high liquidity abroad and conditions that support moderate growth are not permanent and said the bank will remain cautious.

He reiterated that the bank will work to lower inflation to the 4.5 percent center of the official target in 2017. Twelve-month inflation currently stands at 8.74 percent on high food prices. (Reporting by Marcela Ayres; Writing by Alonso Soto; Editing by Jeffrey Benkoe)

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